Water limitations are a problem in many areas of the US and the world. Without water, the efficiency of power plants diminishes as the folks in Washington and California have found out when converting to air cooling their facilities. Losses can be 30% of output which makes that investment in upgrading to 40% efficiency, drop back to 30. Not a good investment, unless you have no option. In water limited places in the world, cooling water will limit the ability to use water-intensive coal, nuclear and oil facilities.

Nuclear power has been argued as a green option, but it is green only with respect to carbon production. Nuclear needs copious amount of water to cool the reactor. An while it remains an ongoing option, many are wary after the Japanese experience. There are 6 licenses in the US for nuclear facilities that expire by 2020, and 27 more by 2030. That means over a third of facilities are at their useful life. Creating second generation nuclear plants is a major, challenge at a financial and political level. For the most part China, Russia and India are leading the way with the US a distant 5th in proposed next generation reactors. We just don’t see a lot of nuclear reactors on the US horizon. Why? Renewable and gas.

The power generation picture has changed significantly in 10 years with respect to large increases in wind and gas. Renewables have increased from 2.4 to 6.5% of the market in 10 years (to 266 TWh). Wind has been the largest growth area (to 167 TWh) despite ongoing environmental issues associated with migratory birds, minimum wind speeds, and lobbying against wind projects (like Bill Koch did in Cape Cod) or the tax incentives used for renewables (like the Koch brothers continue to do along with Tea Party members in Texas). Wind energy costs have dropped by 40% in 10 years and today the majority of wind energy components are built in the US as opposed to overseas. The subsidies have made this possible by limited private capital risk. Nolan County, Texas alone produced more wind than the state of California, despite the ongoing lobbying against it in Texas. Texas has the largest “wind” reserves in the US and many in the public see the need to take advantage of the high wind areas like Texas ($25 billion to date, $13 billion proposed), the Rocky Mountains and coastal areas that do not conflict with migratory birds routes, landscape views or property rights issues. The Blackfeet Nation in Montana has long known that wind is a valuable resource on the reservation. Overall the state of Montana has the second largest wind potential behind Texas. But like Texas there is conflict – in Montana from the fracking industry. Note that the upper Rocky Mountains is where NextEra installs many of its wind fields. California has also gotten into the wind market with projects proposed in the Mojave Desert, although eagle conflicts impact those permits. However, uncertainty about the ongoing tax break , caused by inaction in the House, caused new wind projects to drop 92%, with a loss of 30,000 jobs in one year which creates questions about wind power expansion in the near future.

At the smaller level, combined heat and power (CHP) generation is located at 4200 commercial and industrial facilities today. States are interested. The demand is expected to rise to 40 GW by 2020. Solar markets are often local. Some communities provide incentives for residents to put panels on the roofs. Germany did this and now 25% of their power comes from these solar projects. 2% of houses in Arizona have solar on their roofs. In Hawaii, solar power is half the cost of generated power. However local solar has run into the same issue as wind power – this time the Koch brothers-funded American Legislative Exchange Council has encouraged local power utilities in 21 states to challenge laws that permit solar installations of houses as reducing profitability of power investments by those utilities. Others, like FPL still fund such installations creating and interesting conflict in the market.

Gas has replaced coal as the dominant source, both because of less greenhouse gases and because of much higher efficiency in source-power ratios. California, Texas, Florida and New York, among the four largest power demanding states, have seen natural gas use increase significantly in the past 20 years, virtually all at the expense of coal. Fracking has been the primary reason for the expansion of gas. High quality gas can be recovered from areas through horizontal drilling, but only 3-5% of the gas in the foundation is actually removed from the initial frack. Then the returns diminish to about 10-15% of initial withdrawal within 1-3 years, and refracking must occur to increase production. 100% of the gas is unlikely to ever be achievable. Still gas reserves are likely to be producers for some time, although industry experts expect the peak of current fracking technology in 2025, much sooner than some would hope. Despite there being over 2.4 million miles of gas pipelines in the US, the biggest issue with frack gas is pipeline absence in the big fields in Pennsylvania, Ohio and North Dakota. Refineries are starting to crop up in the Midwest and Pennsylvania to address the gas needs – which may reduce the need for longer pipelines and reduce loss (currently 6%).

Fracking is also a boon to the oil industry and the ability to recovery oil from tar sands in Alberta has increased the potential supply. Like gas, the problem is pipelines, but the lack of pipelines is a boon to the railroad industry, particularly in the Bakken Fields in North Dakota where abundant rail is available via BNSF (hence Warren Buffett bought it). Tank car demands are up to meet the 400,000 tank car loads of crude oil transported in 2013. Demands are expected to climb as new generation tank cars are built to minimize risks of hauling crude oil and coal tar sand products. Tight oil recovery is expected to rise through 2019, while a slow decrease is expected thereafter based on current technology. But note the lack of pipelines create a problem in getting the gas from North Dakota to useful markets. It is estimated that $1 billion per year in gas is flared in the Bakken fields alone. Pipelines and rail are needed, but both are controversial

The pipeline solution is varied and many. North American Oil and Gas Pipelines magazine sees a high investment in pipelines by 2020, with decreasing investments through 2035 as gas recovery drops. XL pipeline has dominated smaller pipeline projects designed to bring tar sands oil to refineries in Texas and Louisiana, but there are other spurs and different pipes are planned for different purposes. The obstacles are many – political, environmental, economic through a host of forces that either benefit directly from the pipelines or that benefit from not having the pipelines (think railroads). Of course a couple of recent rail accidents have created more controversy there, but rail is the current solution for many of these remote fields.

In this blog we are going to talk about trends in the power industry and how they may affect utilities. One of the ongoing themes of this blog is that to be leaders in the field, we need to be cognizant of what others are doing and how those actions might affect utility operations. Power is a big cost for utilities – often 10-15% of the total operations costs where a lot of pumping is involved. In most communities, the utility system is among the largest consumers of power, which is why many utilities have load control agreements in place – power companies can off-load power demands by having the utilities go to onsite generators. Our community’s building account for 70% or more of local energy use.

The need for power is expanding, albeit at a lower rate that population growth in many communities. This is because new building construction measures tend to insulate better and install more energy efficient equipment. Power companies often will subsidize these improvements to reduce the need for more expensive plant expansions. Where expansions are needed, purchase/transfer agreements or renewables are often a convenient answer.

But long-term we are seeing that the power industry is changing in other ways too. Already we see a migration away from coal for power generation. This was occurring before the new regulations were in place for carbon dioxide. Certain utility companies like NextEra, the largest wind and solar power generator in the US, and the parent of Florida Power and Light, have reduced greenhouse gas emissions from their plants by converting to other sources like combined heat and power (CHP), and increasing efficiency. The typical oil or coal power plant is 30-35% efficient, while the newer gas turbine systems are up to 45% efficient. That makes a big difference in costs as well as emissions when gas emissions are half the coal and oil emissions. NextEra is well placed for carbon trading, a concept some fight, but the US had been emission trading since the early 1990s, so carbon trading markets are already in place. The only thing needed is the regulations to put them into play. Buy that NextEra stock now and hope for carbon trading!

But NextEra is not the only likely winner under this carbon trading scenario. ExxonMobile is big into gas, Exelon is big in the nuclear power industry, Siemens and General Electric, which make wind and gas turbines, are also likely to see growth. All have poised themselves years ago as the impact of carbon dioxide becomes more apparent. Most of the industry executives acknowledge climate issues and recognize that people will expect the industry to do its part (the Koch brothers aside). Many power generators like ConEd and FPL are making changes as well, in advance of the regulatory requirements to do so. They see it as good business. They also see it as a means to make more power at a given facility (by increasing efficiency) while reducing water use. Water use can be a limiting factor, so we will discuss that in a couple days…

In June, President Obama made a speech about the increase in renewable power that the United States had created in the last 4 years, and announced goals to double this amount in the next four. Virtually all of this power was solar and wind power. Little mention was made of hydroelectric or onsite sources. But the latter have been around much longer than the former sources and there may be options to increase their contributions under the right circumstances.

Hydroelectric power has been in use in the US for over 100 years. By the 1930s, 40 percent of the nation’s power came from hydroelectric dams, including some fantastic accomplishments of the time like the Hoover Dam. Today we have over 100,000 dams in the US, most of which provide power. Today hydroelectric is only 6 percent of our total. The reluctance to continue with hydroelectric power involved fisheries, land acquisition costs and legal issues. Some hydropower options are excellent. Hurting fisheries (which disrupt local economies dependent on those fisheries) may not be, and therein lies part of the dilemma.

But water and wastewater utilities are actively looking for means to reduce power costs. Depending on the utility, pumping water can account for 80-90 percent of total power consumption, especially with high service pumps on water systems that require high pressures. More efficient pumps is one obvious answer, but of fairly limited use unless your pumps are really old. Variable speed drives can increase efficiency, and the cost is dropping. But note that with all that high pressure, how do utilities recapture the energy? We often don’t and the question is whether there is a means to do so that can benefit up. The first step is looking at plant hydraulics. Is there a way to recapture energy in the form a pressure. For example of reverse osmosis systems, we can install a turbine to recapture the pressure on the concentrate side. They are not very efficient at present, but the potential is there. On long gravity pipe runs for water supply, a means to recapture pressure might also be available.

Of course on-site generation of power is a potential solution. Water and sewer utilities have land, and on the wastewater side, methane, so producing power is possible. This solution, however, may not be embraced by power utilities due to the potential revenue reduction potential and loss of embedded reserve capacity at water and wastewater plants. As the water facility takes on on-site generation, their load profile may shift significantly placing them in under a different rate structure. This may greatly reduce the benefit to the facility. There are, however, approaches to permit win-win solutions. The goal is to put willing power and water utilities together to permit local generation that will benefit both power and water utility systems to encourage public – private partnerships. A medium to large wastewater plant can generate at least a third of its power needs. Some even more if they take in grease, oils and other substances that should not be put into the sewer system. The potential there is significant. EBMUD has a plant that is a net seller of power. We should look for opportunities. But don’t forget, water utilities can create hydropower without impacting fish populations. We just need to seek out the right opportunities.